A core satellite investment approach provides banks with a unique opportunity to cater to their clients’ specific preferences and needs by leveraging the bank’s investment expertise and creating a distinctive offering. WealthTech solutions like Finfox enable financial institutions to present high conviction investment themes in a compelling and dedicated format, conveying the specific value-add of advisory services and enhancing the overall client experience.

Engaging clients with targeted satellite modules
In short, a core satellite investment approach is based on a broad diversification within the core portfolio to minimise investment risk and achieve normalised risk-adjusted returns over the long term. 

Satellite investments, on the other hand, allow for targeted high conviction positions in specific key sectors or themes that the bank focuses on, thus reflecting a client's specific interests and preferences. Furthermore, the satellite investments enable flexible, tactical plays based on changing market conditions, capitalising on short-term opportunities without disrupting the long-term core positions. This fosters a more responsive, tailored investment approach that ideally generates alpha or at least a subjective value-add for the client on the specific high conviction investment opportunity. 

An illustrative example of this high conviction investment approach is promoting ESG principles by aligning them with the United Nations Sustainable Development Goals (SDGs) in satellite modules or, going one step further, prioritising impact investing topics over expected market returns. This level of personalisation helps clients feel more connected to their investments and allows for a mental investment bucket where the primary focus can be shifted away from a return-only perspective.

Competitive differentiator and enhanced value proposition
By incorporating satellite modules based on investment themes into the portfolio construction, banks can showcase their research expertise and their ability to cater to discerning client needs in the advisory process. They can utilise satellite investments to shine a spotlight on unique investment themes and create a highly personalised offering which distinguishes them from competitors (e.g. ESG, crypto assets, emerging technologies). That way, the core-satellite approach provides a distinct value proposition for the client and unlocks a competitive edge in wealth management for the bank, especially if it is supported by a state-of-the-art technology solution that allows for a value-adding, seamless client experience.

Improved client communication and transparency
Best-in-class technology solutions offer the bank’s clients easy access to well-structured client reports, dashboards, and appealing visualisations that clearly and transparently show the performance and composition of their satellite portfolios.

Separate reporting for both the overall portfolio and the various satellite components helps clients understand how each part of their satellite portfolio is performing. This transparency translates into a direct value-add for the bank’s clients. It supports the bank to foster a more client-centric communication in general and, even more importantly, to position topics and themes which the client is passionate about.

Detailed satellite module reports and factsheets provide clients with comprehensive information, allowing the bank to convey the message behind the high conviction offering in a dedicated context. The varied and structured presentation of information supports financial literacy and helps clients engage with satellite content in a flexible and attractive way, enhancing the identification with their investments and their digital experience.

Increased bank efficiency and standardisation in the advisory process
Banks providing wealth management services almost always have both a discretionary and advisory mandate offering. In our opinion and through discussions with clients, we are convinced a core-satellite investment approach combines the best of both worlds.

• Discretionary mandates
  For banks, discretionary mandates are highly efficient, scalable, and profitable. Hence many banks strive to shift advisory mandate clients to discretionary offerings, especially for the lower end of the wealth management segment. This works well for passive clients who don’t want to be involved in their investments, but leaves many engaged clients dissatisfied and uncatered for.
   
• Advisory mandates
  Advisory mandates allow banks to showcase the full value-add of their client adviser and research capabilities. However, in the lower end of the wealth management segment it is time-consuming, hard to scale and, in most cases, not as profitable as equivalent discretionary mandates for the bank. Clients, on the other hand, benefit from individualised services that are tailored to their needs and interests.

The core satellite offering provides the basis to combine the advantages of both solutions – for the client and for the bank. This is achieved by integrating discretionary building blocks into an advisory offering facilitated through satellite modules.

In comparison to advisory mandates this approach significantly reduces the required discussions on instrument level and induces a shift of focus on high conviction themes. In return the themes are based on discretionary building blocks ensuring efficiency, scalability and, additionally, a centralised active management. Yet clients still receive an individualised service and a portfolio tailored to their needs and interests.

Given that the approach is implemented well, it should also provide banks with a hedge against the ongoing pricing pressure they face in the discretionary mandate offering, as the average perceived value and service delivered by the client adviser is greater.

Driver for hybrid investment advice
A well implemented core-satellite investment approach is also a driver of adoption towards a successful hybrid investment advice offering. In the bank’s self-service channels, clients are given the opportunity to engage with topics of interest and inform themselves through dedicated reports written by leading experts and analysts. However, a client adviser is still available for advice in connection with their portfolio at the push of a button. Depending on the offering of the bank and the self-service tool in place, even self-execute investments, which are being checked for suitability in the overall portfolio context, are an option.

Furthermore, today’s omnichannel capabilities allow the bank to know in real-time what their clients are searching for, enabling the advisers to proactively catch up with their clients on topics they have shown interest in. That leads to more frequent client interactions and fosters closer client relationships.

Leveraging best-in-class technology in the advisory meeting
Technology plays a pivotal role in implementing and enhancing core-satellite investment strategies by providing banks with advanced tools that streamline processes, improve decision-making, and foster client engagement. Best-in-class technology solutions actively involve the bank’s clients in the advisory process and bring complex topics to life in an interactive way. 

For example, FinfoxTouch, our tablet-based advisory tool, transforms client meetings into a hybrid, superior client experience. Using client-centric tools like FinfoxTouch for a core satellite offering, advisers benefit from various features:

• User-friendliness
  FinfoxTouch allows to select core and satellite modules with just a few clicks, either before or during advisory meetings, tailoring portfolios to clients' preferences in an easy and appealing way.

• Centralised management
  The tool provides a central hub where all information related to the bank’s core and satellite modules is stored and easily accessible, ensuring consistency in service delivery.

• Transparency
  FinfoxTouch brings full transparency regarding satellite performance and costs.

In summary, a well-implemented core satellite approach combined with a best-in-class technology solution puts the client experience centre stage, and sets new standards in wealth management.

Interested in accessing the Client Experience Toolkit 2024? You can read the report online here.

ABOUT FINFOX
Finfox is one of the leading software solutions for hybrid investment advice for banks, advisers and their clients, developed by Zurich-based WealthTech firm ECOFIN Software and Technology AG.  Thanks to intelligent business logic, a consistent data set and full omnichannel capability, our software makes the advisory process a high-quality, regulatory compliant and seamless experience across all channels and client touchpoints. Private banks, savings banks and Swiss cantonal banks equally trust in Finfox. We offer solutions for all segments from wealthy to affluent and retail clients.

For more information, visit Finfox’s profile here.

ABOUT THE CLIENT EXPERIENCE TOOLKIT 2024
The Client Experience Toolkit 2024 is the first in a new series of Toolkit reports focused on key technology themes and tools impacting global wealth management. Each Toolkit report focuses on a key wealth management theme, segment or geography.

This first issue takes the form of a thematic report and shines a light on the trends and solutions influencing the successful delivery of client experience (CX) in wealth management. It features 11 showcases, each centred around a dedicated CX-relevant topic and related solution. 

The report will be distributed at the Client Experience Toolkit Roadshow, hosted at individual events in Geneva, Zurich, London, Singapore, and Dubai in late September and into October. These are free to attend for any form of wealth manager and provide technology vendors an opportunity to sponsor or demo.

Join us at the Client Experience Toolkit Roadshow 2024: 

• Geneva – discover more and register here.
• Zurich – discover more and register here.
• London – discover more and register here.
• Singapore – discover more and register here.
• Dubai – discover more and register here.